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14 February 2024

The great lapse - New Zealanders are being squeezed out of house and contents insurance due to rising premiums

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More than two-thirds of respondents in Consumer NZ’s latest insurance satisfaction survey were concerned about the cost of house insurance, with 8% of homeowners letting their policy lapse due to high costs.

“This continues a pattern we started to see last year. We urge New Zealanders to review their current level of cover, and shop around,” says Rebecca Styles, investigative team leader at Consumer NZ.

“It’s likely you’ll find a better deal and can maintain some level of protection - which is better than no cover at all.”

What’s driving prices up, and how can people bring them down?

In the past 10 years, house insurance has increased 97%, while contents insurance has gone up 48%¹.

“Wellington has been the hardest hit with premium price increases for a standard house – up 29% from this time last year. It was followed by Auckland up 26%.

“For a large house, premium prices rose most in Auckland – up 28% – followed by Hamilton on 24%. Dunedin also had increases for standard- and large-house premiums, up 12% and 9%, respectively.”

Styles says that the cost of reinsurance, extreme weather events and increased use of risk-based pricing on individual properties are all factors in the price rises.

“Insurers also now have access to granular and more accurate information around the risks posed to particular areas and properties in New Zealand.

“Given the more frequent and extreme weather events Aotearoa is experiencing, and their related claims, the cost of insuring properties has gone up, and these costs are being passed onto consumers.”

“The best thing people can do is to review their current level of cover, shop around and get ready to switch when you find a cheaper policy – they are out there.”

How to ensure you stay insured

Consumer’s insurance satisfaction survey showed that only a mere one in five respondents were likely to change insurers in the next 12 months.

“Our surveying shows time and time again that it’s difficult to compare insurance providers to find the best deal. Now, to make things trickier – many insurers won’t provide online quotes without a risk assessment of the property.”

1. Opt for a larger excess

“Instead of paying $500 on a claim, you could increase it to between $750 and $2,500 and this can drop your premium.”

Styles shares this advice with one caveat.

“If you decide to increase the excess, make sure you can afford it. Should disaster strike – you don’t want to risk paying for insurance you can’t even access.”

2. Reassess your needs

If you’ve received quotes for insurance that you still can’t afford – Styles says you can consider choosing a fire-only or fire and burglary policy.

“While you may not be covered for everything, it will be cheaper than comprehensive or ‘all-risk’ cover, and crucially, mean you’re still entitled to EQCover in the event of a natural disaster.”

3. Get that discount

Consumer’s premium price survey found some insurers offered discounts for taking out combined house and contents policies, being claims free for a set number of years and for having an alarm.

“Given rising costs, paying for your premium for the year ahead (rather than monthly, for example) may afford you an annual discount. Given rising costs, this is unlikely to be a viable option for many consumers.

“If that’s you – know you’re not alone.”

For more tips, check out our house and contents insurance buying guide.

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